Even as the Government pins its hopes on a good rabi crop and a good monsoon next year to contain food price inflation, the huge wastage fruits and vegetables worth Rs 30,000 crore annually due to a highly fragmented supply chain & cold chain infrastructure, stares it in the face.

To stimulate the growth of the food processing sector and minimize waste, FICCI has suggested immediate policy interventions by way of a 16-point package of measures to streamline and augment the entire agri supply chain, clogged as it is with several intermediaries including farm processors, distributors, and retailers.

Apart from initiating steps to make it easier for corporates to enter into contract farming, agri-product distribution, post harvest management, warehousing and development of cold chains, FICCI has stated that the need of the hour is sustained development in agriculture and large investments in technology, infrastructural development.

India is one of the world’s largest producers as well as consumers of food products, and the food processing sector plays an important role in the Indian economy. This industry is the front end of agriculture sector, which is a significant economic component, employing nearly 60% of the country’s population and contributing to around 25% of India’s gross domestic product. With access to a large natural resource base of 161 million hectares of arable land, 15 million hectares of fresh water reservoirs, the largest livestock population in the globe and diverse agro-climatic conditions, India is a favorable destination for growth in the food industry.

Food is the biggest consumption category in India with 31% of the consumer’s wallet expenditure and by 2015, the Indian food industry is expected to reach USD258 billion from the current level of USD181 billion (FICCI- E&Y report 2009)

The following are the FICCI recommendations to stimulate the growth of the food processing sector through policy interventions for beefing up supply and cold chain infrastructure:

1. So far there is not enough private investment in the development of agri-focused infrastructure such as creation of pre-cooling facilities at farm gates, warehousing and storage infrastructure facilities including cold storage, wholesale/terminal agriculture markets, because of inherent viability gaps. The Government needs to ensure funding of viability gap, for existing food processing units or other entities having cold storage facilities for food products, up to 5 crore for 5 years. Such tax incentives should be viewed as investments, which will have enormous positive multiplier effects on the agriculture and food processing sectors and the national economy in general.

2. The incentives provided for establishing cold chain infrastructure under section 80-IB (11) and (11A) has not proved attractive enough. In last year’s budget, Government has introduced investment linked tax incentive for specified businesses, by way of allowing 100% deduction of expenditure of capital nature incurred by the assessee (section 35-AD). The benefit is merely of accelerated depreciation, which is neither attractive nor an adequate substitute for profit-linked incentive, the restriction is that the losses incurred in such “specified businesses” can now be set-off only against profits from another “specified businesses” ( section 73-A also introduced last year). This would even negate out whatever deduction benefit is provided. The “specified businesses” means the any one or more of the following business, namely:-

(i) Setting up and operating a cold chain facility;

(ii) Setting up and operating a warehousing facility for storage of agricultural produce;

(iii)Laying and operating a cross country natural gas or crude or petroleum oil pipeline   network for distribution including storage facilities being an integral part of such network

For this purpose the “cold chain facility” means a chain of facilities for storage or transportation of agricultural and forest produce, meat and meat products, poultry, marine and dairy products, products of horticulture, floriculture and apiculture and processed food items under scientifically controlled conditions including refrigeration and other facilities necessary for the preservation of such produce.

FICCI has, therefore, suggested that the establishment of cold chain and other modernized technology for up gradation of storage handling and transportation etc. should be granted infrastructure status and the tax benefit thereto provided under section 80 – IA.

3 Priority sector lending norms for the banks should be appropriately changed to include investments made by corporates in agri infrastructure concerning supply chain and cold chain in the direct finance category of priority lending.

4. Private sector investment in agri infrastructure impacting supply chain and cold chain infrastructure should be eligible for 150% weighted deduction as is the case with investment in R&D.

5. Research and development in the area of agri business supply chains should also be eligible for 150% weighted deduction to promote innovation and cost effective solutions.

6. Grant fiscal incentives by way of 100 per cent depreciation on all investments in physical assets like infrastructure development by the private sector in agriculture and the entire agri-value chain. They should be given 100% tax holiday in respect of the profits of the undertaking for a period of at least 10 years and further giving the assessee an option to claim this tax holiday for any 10 consecutive years out of 15.

7. The excise duty on the refrigeration machinery components & material handling equipment should be totally waived. This should also include thermal insulation materials including sandwich insulation panels and doors.

8. Extend cost subsidies to all cold chain projects, ranging from 25% to 50% of the cost of the total cost of the project.

9. Under the current scheme ‘Development/Strengthening of Agricultural Marketing Infrastructure, Grading and Standardization and/or Rural Godown’, and creation of quality added rural infrastructure, the subsidy cap should be raised 3 crore to Rs 5 crore to encourage faster development of agri-infrastructure.

10 Banks and other financial institutions should offer term loans for all supply chain and cold chain projects at lower interest rate of 6%. NABARD under a new window of direct financing should provide direct loans at this rate of interest to the private sector for warehousing, integrated supply / cold chain and allied infrastructure development activities in the rural areas, under RIDF funds.

11. Subsidy up to 50% of the total cost should be offered for up gradation and modernization of old projects to make them energy efficient.

12.  Incentivize Green cold chain projects which have eco-friendly design, energy efficient thermal insulation & plant and machinery, water recycling, renewable energy systems etc.

13. Investment by foreign companies in  modern distribution / supply chain formats with Cold storage facilities should be classified / categorised as part of ‘infrastructure’ sector  (and to be entitled to funding even through ECB route}

14. Concessional customs duties on imports of equipment / machinery for cold storage facilities.

15. All Cold Chain projects, be treated as agriculture activities for the consideration of land use, electricity tariff etc. States to provide power subsidy for first 10 years to all cold storage facilities for storage of food products.

16. Provide transport assistance @ 25% of freight on export of fruits & vegetables, flowers, fresh poultry, meat, marine and dairy products.